Smart Giving: How to Make the Most of Your Charitable Donation

Initially, to be sure you are donating to a worthy and above-board organization, request a copy of its financial report. It summarizes the organization’s tax status, programs, and how the funds are used. With the exception of places of worship, all charities must file such a report with the IRS. You may also contact your state’s attorney general’s office or the Better Business Bureau for further investigation.

A wonderful aspect of giving is the ability to deduct at least some of your donation from your income taxes. In order for the contribution to be tax deductible, it must be made to a qualified organization that meets IRS guidelines. To know if it does, you may ask the organization.

How to Donate Money

When donating money, for both tax purposes and financial safety reasons, never pay with cash. Either write a check, made payable to the organization (never the individual collecting the donation), or use a credit or debit card. Always avoid giving your account information over the telephone.

How to Donate Property

If you are considering donating property to a charity, such as a vehicle or boat, be aware that as of the 2016 tax year, deduction rules have changed in response to past abuse of the system. For example, if you donate real property with a claimed value of over $500, your deduction depends on what the charity does with it. If the organization uses your property (or makes a significant improvement to it), you may deduct its full fair market value from your income taxes. If, however, they simply sell the property, your deduction will be the gross price the charity receives from the sale.

How to Donate Goods

Yet another way of giving to a cause is to donate goods – including clothes, computers, and other personal and household items – to a charity. Before boxing them up and delivering them to your local shelter, first determine their fair market value so you can receive the appropriate tax deduction. Fair market value is considered the price at which property would change hands between a willing buyer and a willing seller.

How to Donate Time

Have more time than money and possessions, or want to share your particular strength with those in need? Volunteer. Tax breaks are available to those who give in this special way. While there is no deduction for the value of services you provide, you may deduct a number of out-of-pocket costs associated with volunteerism. Check with the IRS to see which costs qualify.

Overall, be sure to carefully read IRS rules, or have a professional help walk you through your tax return. Keep a detailed record of your donations. You should have evidence of your cash or property donation, or of the condition and number of items you donated; including the date you purchased the items and what their original price was, along with signed and dated receipts from the organization that received them.